VW wants to enter new segments with smaller models aimed at Chinese consumers outside of large metropolitan areas.

An 11th brand for VW?

Apparently, yes.

VW is planning a new small car brand for China, according to several published reports.

In a report by the German magazine WirtschaftsWoche, the motto of the new brand will be "Volkswagen für die Volksrepublik" - Volkswagen for the People's Republic.

The new brand will develop small cars to be sold to new demographic segments; namely for the growing number of Chinese consumers outside of large cities like Beijing and Shanghai who are beginning to buy small cars.

VW, like all foreign automakers, builds and sells cars in China under its own brand but in joint-venture operations with Chinese partners as mandated by Chinese law. And the Chinese government plans to increase the market share of local brands from 30 percent to 40 percent by 2015 for the Chinese auto industry. VW would like to develop a unique brand or sub-brand for China with its partners there to sell the new smaller cars.

"The Chinese government has been promoting Chinese brands for some time. We are currently in talks with our Chinese partners. In general, we see a local brand as an opportunity to enter new market segments, especially those we have not been able to get into so far," VW China CEO Karl-Thomas Neumann recently told China Daily.

But VW is just playing catch-up. Other foreign automakers like Honda and GM have already begun developing new local brands with their Chinese partners. Guangqi Honda, a partnership between Guangzhou Automobile Group and Honda Motor, has announced the Everus brand which begins sales of the S1 model early this year. And SAIC-GM, GM's joint-venture with Shanghai Automotive Industry Corporation, has unveiled the Baojun brand which will also release its first model this year, the 630, based on the Chinese Buick Excelle.